The discovery has transformed Fosterville from a small marginal operation into one of Australia's most profitable gold mines, and Surbiton Associates estimate Fosterville was the fourth-biggest gold mine in Australia by production volumes in the three months to March 31.

Arete Capital chief executive Campbell Olsen told The Australian Financial Review that the royalty hike was a complete surprise.

"We are shocked and a bit stunned to be honest, there has been no consultation, there has been no discussion whatsoever,'' he said on Saturday.

''We had Tim Pallas up at our Stawell mine only a couple of months ago, thanking us and telling us how wonderful it was to get investment in regional areas and what a big supporter of the mining industry he is. Now without notice or consultation, bang, here comes a new tax.

"We don't mind bad news, we just don't like surprises."

At 2.75 per cent the royalty rate will be higher than the 2.5 per cent royalty imposed on the significantly larger Western Australian gold industry. The WA Labor government sought to raise that royalty rate to 3.75 per cent in 2017 but the move was blocked in the state's upper house after a vocal campaign by big miners like Newcrest, Barrick and Newmont.

"This is a tax the industry in Victoria can't handle. Most gold producers in Victoria are extremely marginal and would not suffer any external shocks at all,'' said Mr Olsen.

''The Victorian gold industry is just getting back on its feet, it is just starting to attract international interest and investment, and we don't need our international investors to be looking at us thinking 'here we go again, another resource rent tax, another change in government policy', what next?''

Kirkland Lake Gold was also blindsided by the royalty plan, but declined to comment directly.

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The Stawell mine employed 10 people when it was acquired by Arete Capital, but now directly employs 200 workers and Mr Olsen said there were a further 500 jobs indirectly supported by the restart of the mine.

Arete plans to expand the mine further having made discoveries on the eastern side of the tenement, but Mr Olsen said his investors would need to review their plans in light of the royalty hike.

"This forces our investors to review everything, we are getting questions from abroad about what is going on and where this has come from. Our international investors thought this was a reasonably consistent jurisdiction but now it looks like WA all over again, it looks like a smash and grab," he said.

"We have plans to expand, but we have to keep reviewing those as there are other opportunities, capital is mobile".

The Minerals Council said the Labor government's commitment to rural communities would be revealed to be hollow if it did not immediately abandon the tax.

Other Victorian gold producers or explorers include ASX listed Nagambie Resources, ASX listed Navarre Minerals and Singapore-listed LionGold, which is mining beneath the site of the historic Eureka Stockade near Ballarat.

The development of alternative supplies of critical minerals, as well as other joint efforts by Australia and the United States to address Chinese influence in the region, will dominate talks in Washington.